2011 Beer Report: Another year of trading places
After the previous year’s trend of trading down to below-premium brands, in 2010 brewers narrowed the price gap between below-premium and premium brands. The resetting of prices allowed more consumers to return to premium selections, says Nick Lake, vice president and group client director for The Nielsen Co., Schaumburg, Ill.
“In the beer industry, the story was about brand equity and building price points,” Lake says. “In fact, the beer industry overall saw about a 2 percent increase in prices, which is pretty amazing in the economic times that we’ve been facing.”
The overall beer category remained relatively flat with 0.6 percent change vs. the previous year in dollar sales with a total of $24.6 billion in sales across all beer categories in U.S. supermarket, drug, gas, convenience and mass merchandise outlets, excluding Wal-Mart, club and liquor stores, for the 52 weeks ending Jan. 23, according to SymphonyIRI Group, Chicago.
Despite flat performance in dollar sales, case sales experienced a decline of 1.7 percent during the measured time period, SymphonyIRI data shows. In comparison, wine volume grew 2.6 percent and spirits’ volume increased 3 percent in U.S. supermarkets through Jan. 2, according to SymphonyIRI data presented during The Brewers Association’s Power Hour teleconference series’ “2010 Beer Category Overview and Craft Segment Review.”
“2010 will go down as a very challenging year for the beer category and certainly one that is not going to be reflected proudly upon,” says Dan Wandel, senior vice president of beverage alcohol client solutions for SymphonyIRI.
Craft beer, flavored malt beverages (FMB) and cider dominated the good news in the category, each with double-digit growth in 2010. With approximately $1.1 billion in sales, craft beer continued to grow in SymphonyIRI’s measured channels. The category posted a 14.6 percent increase in dollar sales and 13.1 percent rise in case sales for the 52 weeks ending Jan. 23.
Consumers’ continued embrace of craft beer represents a tangential trend of “trading away,” says Ty Law, U.S. research analyst, Euromonitor International, Chicago. In the “trading away” trend, consumers treat each purchase as a reward and are choosing premium beer instead of standard beer brands such as Bud Light and Miller Lite, Law says.
Effects of pricing
The beer market rebounded slightly last year by experiencing fewer declines in 2010 than in the previous year. In 2009, many consumers chose sub-premium brands and large volume package sizes.
Heavy beer buyers, who are classified as those who purchase 24 or more cases a year, continued to favor domestic sub-premium brands, according to SymphonyIRI Group data presented during the Brewers Association Power Hour teleconference. Domestic sub-premium brands, such as Natural Light, Busch Light and Keystone Light makeup 49 percent of the volume purchased by heavy beer drinkers, the research firm said. The second largest segment is domestic premium brands, including Bud Light, Budweiser, Coors Light and Miller Lite, which attracted 36 percent of heavy beer consumers’ purchases.
According to SymphonyIRI data in measured channels through Jan. 23, domestic sub-premium brands had an average increase in price of $0.51 a case with an average case price of $14.31. The average domestic premium case value is $19.52, which reflects an average price increase of $0.27 cents each case, according to SymphonyIRI.
In dollar sales, SymphonyIRI’s list of Top 10 overall beer brands shows that Bud Light, Coors Light, Natural Light and Busch Light reported slightly positive performance in measured channels through Jan. 23. The remaining brands reported declines in dollar sales, including a 3.1 percent loss in dollar sales for Corona Extra and Heineken’s 3.3 percent dollar sales decline.
Less optimistic results were shown in case sales as only one of the Top 10 overall beer brands â€” Coors Light â€” reported case volume increases in measured channels through Jan. 23, according to SymphonyIRI data. The remaining nine reported losses, which ranged from a 1.4 percent decline in case sales for No. 1 brand Bud Light to 6.9 percent drop in No. 2 seller Budweiser.
Coors Light reported the largest increase in the beer category with an additional 1.3 million cases sold vs. the previous year through Jan. 2, according to SymphonyIRI data presented during the Brewers Association’s Power Hour teleconference. Keystone Light followed with a little more than 793,500 additional cases sold during the time period.
Price increases drive shareholder value, but affect top-line industry growth, according to a “State of the U.S. Beverage Alcohol Industry 2010” report from Bump Williams Consulting, Stratford, Conn.
In 2010, MillerCoors’ underlying net income increased nearly 22 percent to almost $1.1 billion, according to the Chicago-based brewers’ full-year report released last month. The brewer attributed the increase to positive pricing, favorable brand mix and continued strong cost management. However, MillerCoors’ domestic sales to retailers declined 3.2 percent and domestic sales to wholesalers decreased 3 percent for the full-year 2010, the company reported.
According to SymphonyIRI data, Anheuser-Busch InBev, St. Louis, and MillerCoors, Chicago, reported declines in both dollar and case sales through Jan. 23. Anheuser-Busch InBev reported case sale decreases of 3.1 percent and a total of $12.5 billion in sales, which represented a 1.1 percent decline from the previous year, SymphonyIRI data show. MillerCoors also reported a 3.2 percent drop in case sales and a 1.3 percent decrease in dollar sales, which totaled $6.5 billion in measured channels for the 52 weeks through Jan. 23.
Of the import producers only Crown Imports, Chicago, reported positive numbers for the year ending Jan. 23 with a 1.8 percent increase in case sales and dollar sales remaining relatively flat, SymphonyIRI reports. Its counterparts Heineken USA, White Plains, N.Y., and Diageo Guinness USA, Stamford, Conn., both reported single-digit decreases in dollar and case sales. Heineken USA experienced a 2.1 percent drop in case sales and 2.8 percent decrease in dollar sales in the measured channels for $1.1 billion in sales through Jan. 23, SymphonyIRI said. Diageo Guinness reported $403.7 million in dollar sales and fell 1.4 percent in case sales and 1.3 percent in dollar sales in the same period.
The remaining top 10 beer vendors, each reported increases in dollar sales with The Boston Beer Co., Boston; North American Breweries, Rochester, N.Y.; and Mark Anthony Brands, Vancouver, reporting double-digit dollar sales growth vs. a year ago, according to SymphonyIRI. Pabst Brewing Co., Woodridge, Ill., ranked sixth with a 4 percent rise in dollar sales to $393 million, but reported a 0.8 percent decrease in case sales. Not far behind the double-digit growers, D.G. Yuengling & Son, Pottsville, Pa., grew 9.4 percent in dollar sales for a total of $177 million and case sales increase of 8.5 percent.
Across retail channels, beer continued to struggle as retailers saw shopper loyalty and foot traffic decline, according to Bump Williams Consulting.
Grocery share of spending remained unchanged between 2009 and 2010, but competition for share of food and beverage is intensifying, according to SymphonyIRI data presented during The Brewers Association’s Power Hour conference series “2010 Beer Category Overview and Craft Segment Review.” The research firm reported that supermarkets make up 49.4 percent of channel share and Wal-Mart an estimated 20 percent.
Despite channel leadership, supermarkets endured the continued ups and downs of the beer market during the past few years, SymphonyIRI’s Wandel says.
“In the supermarket channel, which up until last year has fared OK, we actually did see the category struggle, and it did not grow,” he says. “It shrunk from a volume perspective by 1.7 percent vs. the previous year, which was kind of the headline there.”
Cost-consciousness continues to be a consumer trend and several retailers debuted private label beer brands this year. In spring 2010, convenience chain 7-Eleven introduced Game Day Beer. Since then, Walgreens has joined the fray with the addition of Big Flats 1901 premium lager, which is sold for $2.99 each six-pack. Big Flats also is available in 24-packs for $11.49 at Walgreens stores.
Last month, supermarket chain Supervalu added Buck Range Light beer to its line of private beer brands. Buck Range Light is characterized as an American lager and is sold in 12-packs for $5.99 in most of the retailer’s markets. Supervalu also offers two craft brands, RJ King Wingwalker and Metolius, as well as import brands Gouden Haven and San Lucas.
“Private label beer is an interesting phenomenon,” Nielsen’s Lake says. “Retailers have been trying private label beers on and off for quite a while, and for the most part, they typically don’t gain a lot of traction. The reason that they don’t gain a lot of traction is because the industry, in particular, the likes of Anheuser-Busch and MillerCoors and certainly the big import players, Corona and Heineken, have all built a business around brands and brand equity.
“And as you look at the beer industry, there are so many segments within it that there’s really a price point for every consumer,” he continues. “Historically, they haven’t had a lot of success and I’m not convinced they are going to have a lot of success today, but it could happen.“
Convenience stores did benefit from the rise in flavored malt beverages, SymphonyIRI’s Wandel says. The FMB segment increased 25 percent in volume and dollars in convenience stores, he says. The category also experienced an increase in competition as the drug store channel expanded with 3,400 new outlets that added beer in 2010, Lake says. The addition of new outlets makes up part of the 8.5 percent increase in sales in drug stores in 2010, he says. According to SymphonyIRI data presented during the Brewers Association Power Hour Teleconference, the drug channel reported the highest increase in retail with 1.1 percent growth since 2009, and it made up 11 percent of the market for the year ending Jan. 2.
Coming back from a nearly 4 percent decline in 2009, imports remained flat in dollar sales and reported a near 1 percent rise in case sales in measured channels for the 52 weeks ending Jan. 23, SymphonyIRI reports.
“In the import category, there was some re-setting of pricing in promotional activity,” Nielsen’s Lake says. “[It] certainly ramped up pricing, ramped up promotion. It was really about making sure that the price gap between premium and imports was at a level that consumers saw the value of trading up. So that was achieved and interestingly enough they started taking back share again.”
SymphonyIRI data show an overall $0.19 decrease in average price per import case in measured channels through Jan. 23. The average price per case of import beer during the time period was $27.18 compared to an $18.11 average price per case for domestic brands, according to SymphonyIRI data.
Despite the price discounts, Lake notes that an average $8 price gap exists between the average import beer and average premium beer.
In addition, several brands have struggled as many people in their key demographics were affected by unemployment, SymphonyIRI’s Wandel says. SymphonyIRI data show that Corona Extra maintained its top spot among imports with more than $917 million in sales, but experienced a 3.1 percent decline in dollar sales and 2.2 percent drop in case sales in measured channels for the year ending Jan. 23. However, the brand began to see a turnaround at the end of last year, he says.
Crown’s Modelo Especial brand was one of three double-digit gainers in the import category. Modelo Especial reported 15.5 percent increase in dollar sales and 19.2 percent in case sales in the measured channels during the time period.
Heineken retained its No. 2 spot among import beer brands, exceeding $569 million in sales. However, the brand experienced a 3.3 percent decline in dollar sales and 2.1 percent drop in case sales for the 52 weeks ending Jan. 23 in measured channels, SymphonyIRI reports. Tecate, a brand of Heineken, ranks fifth with $166 million, but reported a 9.6 percent decline in dollar sales and 8.2 percent drop in case sales during the time period, according to Symphony IRI.
On the other hand, Heineken experienced growth with its No. 8-ranked Dos Equis Lager Especial, which grew 23.4 percent in dollar sales and case sales, SymphonyIRI reported. The increases partly can be attributed to Dos Equis’ marketing campaign starring “The Most Interesting Man in the World,” who recently earned 1 million “likes” for the brand on Facebook.
Labatt Blue and Labatt Blue Light also presented positive numbers in dollar share, with 0.7 percent and 9.1 percent increases, respectively. The North American Brewery-owned brand also introduced Labatt Blue Light Lime Lager, which ranked seventh on SymphonyIRI’s list of Top 10 new brands in supermarkets in 2010, Wandel says.
Stella Artois ranked ninth in the Top 10 import brands in measured channels for the year ending Jan. 23, according to SymphonyIRI. Stella Artois reported $88 million in sales, which represents a 15.8 percent increase in dollar sales and 15.4 percent rise in case sales.
Keeping up with craft
Stella Artois is part of Anheuser-Busch InBev’s growing upscale portfolio, which Nielsen’s Lake says is a portion of a lineup that larger brewers are leveraging to stay in step with the rise in craft beer.
“It is raising the game with the big brewers,” Lake says. “Certainly, Anheuser-Busch and MillerCoors have renewed focus on the high-end of their portfolio. MillerCoors has launched Tenth & Blake [Beer Co.] and moved their Blue Moon, Leinenkugel and some of their imports under that umbrella and changed the way they’re going to market. On top of that, A-B has come out. They’ve got a very strong upscale portfolio with the likes of Stella Artois, Bass and Shock Top.”
The craft beer category overall reported 14.6 percent increase in dollar sales and 13.1 percent increase in case sales. Within SymphonyIRI’s top 10 craft beer brands, only two – Widmer Hefeweizen and Samuel Adam’s Light – reported decreases in dollar sales. The remaining eight brands each reported positive dollar sale performance ranging from 3.6 percent for Samuel Adams Boston Lager to a 141.2 percent rise in Sierra Nevada Torpedo Extra IPA for the year ending Jan. 23.
Consumers are continuing to embrace craft brands, says Julia Herz, craft beer program director for the Brewers Association, Boulder, Colo.
“There’s a lot of trade-up going on from sub-premium to premium beers to the craft level because price point difference is not that big of a jump compared to, say, wine,” she says. “Wine, you’re talking $10, $20, $30 difference, when going to one category to the next to the next. Then you’ve also got trade across from wine and spirits.”
Also making an impact is the increasing availability of craft brands in cans. SymphonyIRI reported 30 craft vendors offered 65 SKUs in cans in supermarkets for the year ending Jan. 2. The figure is an increase from 2007 when 17 vendors offered 28 SKUs in cans. The packaging also is available in a variety of sizes, including 16-ounce cans in four-packs and 12-ounce cans in four-, six- and 12-packs. Total craft can sales ranked $5.8 million through Jan. 2 in supermarkets, SymphonyIRI reported.
Sierra Nevada Pale Ale continues to occupy the top spot among craft beer with $85.5 million in sales and nearly 8 percent of the dollar share of the total craft category. The variety tops SymphonyIRI’s top craft pale ale brands. The brewery’s Torpedo Extra IPA ranks first on the list of craft IPAs with $12.9 million in dollar sales in food, drug and convenience stores for the year ending Jan. 2, SymphonyIRI reports.
Sierra Nevada Brewing Co. is one of the category leaders, along with The Boston Beer Co., Craft Brewers Alliance and New Belgium Brewing, SymphonyIRI’s Wandel says.
“Those four are continuing to grow,” he says. “Their flagship brands as well as their second and third support brands in their portfolios are doing well. But we’re absolutely seeing a lot of regional pockets of success around the country, and we’re seeing a lot of smaller guys really starting to develop in the channels that we track.”
New Belgium’s Ranger IPA was one of four non-FMB brands that ranked on SymphonyIRI’s list of Top 10 new brands in dollar sales in U.S. supermarkets, according to data presented during the Power Hour Teleconference. Ranger IPA ranked fourth with approximately $5.5 million in sales in its first year on the market, the research firm said.
IPAs are prominent on SymphonyIRI’s list of Top 10 new craft beer brands in U.S. supermarkets. Samuel Adams’ Latitude 48 IPA ranks second with $1 million in sales and is followed by Widmer Deadlift Imperial IPA and Flying Dog Raging Bitch IPA.
As new players continue to enter the category, Wandel says, the leaders are losing share within the segment. Six of the top 10 craft beer brands lost share during the year, SymphonyIRI reported.
“What that tells you is that there is a tremendous amount of competition in the segment below those guys that are starting to gain traction in sales,” he says.
During the Brewers Association’s Power Hour teleconference, SymphonyIRI reported that the all other craft brands segment includes 346 vendors, occupies 28.2 percent of the dollar share of the craft beer market and increased 1.5 percent for the 52 weeks ending Jan. 2.
“On top of the 1,600-plus breweries that we have on the books, both large and small, we have over 500 on record for breweries in planning, and that’s extremely significant,” Herz says. “Right now, we’re at the largest number of breweries since Prohibition occurred in this country.”
The association forecasts a continued upward trajectory for the market and recently revised its definition of a craft brewer. The new definition increases the maximum barrelage from 2 million to 6 million barrels and keeps up with the category growth, Herz says.
“If we hadn’t changed that definition, we likely would have lost some of the regional craft brewers, most immediately Boston Beer, but eventually maybe others,” she says. “When you lose the growth in the marketplace and the success in the marketplace from your most successful members, that’s going to take away from the overall statistics that you’re publishing and with that that would have inaccurately reflected the actual success that the overall segment is having.”
Fluctuating toward flavors
Nielsen’s Lake sees a consumer movement toward flavors, which is embodied in the rise of FMBs and ciders.
“What I think the real surprise for the beer industry last year was the resurgence of flavored malt beverages,” Nielsen’s Lake says.
Coming back from a 4 percent drop in the category in 2009, the FMB segment expanded by 18.5 percent in dollar sales for a total of $952 million in sales in measured channels for the year ending Jan. 23, SymphonyIRI reports. The growth was led by Mike’s Hard Lemonade and Chicago-based Phusion Projects’ Four Loko brand.
Diageo’s Smirnoff Ice product maintained its No. 1 spot in the FMB category with $102 million in sales for the 52 weeks ending Jan. 23 despite recording 5.5 percent drop in dollar sales and 5.7 percent decline in case sales. The company was active in launching new varieties with four new flavors appearing on SymphonyIRI’s Top 15 New Brands in dollar sales in U.S. supermarkets.
Mike’s Hard Lemonade reported growth across its portfolio with double-digit growth in dollar and case sales in its Hard Lemonade, Cranberry Lemonade, Variety Pack and Seasonal offerings through Jan. 23 in measured channels. The company also reported 87.7 percent growth for Mike’s Harder Cranberry Lemonade and 94.7 percent increase in Mike’s Harder Lemonade. The product was designed to compete in the convenience store channel and is sold in 16-ounce cans and is available in a range of flavored lemonades and a Limeade variety. Another company innovation, Mike’s Classic Margarita varieties occupied three spots on SymphonyIRI’s Top 15 New Brands in dollar sales in U.S. supermarkets.
Fueling growth in the category, Phusion Projects finished just shy of the Top 10 beer vendor list and reported 253 percent growth in both dollar and case sales for the 52 weeks ending Jan. 23, according to SymphonyIRI. The company’s Four Loko brand experienced triple-digit growth for its Fruit Punch, Watermelon, Grape and Blue Raspberry flavors. The brand attracted attention for its caffeine content and has created reformulated varieties, which are still doing quite well, Nielsen’s Lake says.
However, MillerCoors reformulated its Sparks and Sparks Plus products to remove the caffeine and showed declines of approximately 48 percent in both dollar and case sales in the measured channels for the 52 weeks ending Jan. 23. Anheuser-Busch also offers a caffeine-free FMB. Its Tilt brand was introduced in April 2010 and is organized by color, including Tilt Red, a fruit flavor; Tilt Blue, blue raspberry flavor, and Tilt Green, a lemon-lime citrus flavor.
SymphonyIRI’s Wandel predicts the FMB category might not continue its current growth trajectory. “It’s dependent upon innovation, primarily, but with the change in the caffeinated products, I’ve got to believe that there is going to be a bit of a let-down in the [FMB] segment,” he says.
Analysts also are monitoring the cider category, which recorded nearly $42 million in sales in measured channels for the year ending Jan. 23, according to SymphonyIRI. The category’s growth is mirroring that of craft beer, Wandel says. Cider increased 17 percent in volume and 23 percent in dollars in measured channels for the 52 weeks ending Jan. 23.
The beer category is projected to attain a certain amount of stability in 2011.
“My prediction is that the category will probably grow, maybe half a percent to a percent,” Nielsen’s Lake says. “I think you’ll continue to see growth in the craft segment. I think you’ll see what I would call upscale beer, to include both craft and imports, I think you’re going to see that segment grow this year as the economy gets better and more and more consumers use beer as an indulgent reward.” BI